If you filed a Michigan return with non-resident shareholders, partners or members, you may have recently received a notice from Michigan regarding the new required 2012 Flow-Through Withholding Quarterly Return. Quarterly returns (Form 4917) and withholding on estimated Michigan apportioned income is now required of all pass-through entities with non-resident owners.
Entities that have no Michigan distributable income or have less than $1,000 per quarter should file a Zero quarterly return. An Annual Withholding Reconciliation Return is due February 28, 2013.
All pass-through entities, including those with no non-resident shareholders, are receiving this notice (in an attempt to catch withholding violators). A quarterly return is required of everyone who received the notice unless the entity files a Notice of Change or Discontinuance.
We have asked about penalty assessment for non-compliance if no tax is due and the quarterly form is not filed. We did not get a yes or no response. We were told it was a good question and that they would look into this since the compliance rule is so new. We will let you know as more information becomes available.
Please post a comment here if you have any questions.
What do you think the best approach might be to situations involving tiered partnerships? Or nonresident trusts? Based on the limited info available, do you think it is better to encourage withholding at a corporate rate (higher) when there are multiple levels of distribution? When there are trusts/estates involved, are you planning to encourage withholding upon these entities too? (not by them, but for them)